Opportunity cost is a fundamental concept in economics, which states that every economic choice has a cost. Every choice has a cost because every choice involves a trade-off: you give up something in favor of your first choice. When you choose to use your limited time one way, for example, seeing a movie, you give up other uses of that time, say, studying. The opportunity cost is defined and measured as the "best alternative foregone" when a choice is made. In other words, the opportunity cost is the next best thing, in your own view, that you could have done with your limited resources, your income or time, for example. This notion that resources are limited is an important aspect of the opportunity cost concept since, if resources were unlimited, you would not have to choose at all. The opportunity cost of a choice reflects the real consequences you expect will follow from making a particular decision. This cost is usually the difference between your first and second choices.
Opportunity Cost
Introduction
Opportunity cost is a fundamental concept in economics, which states that every economic choice has a cost. Every choice has a cost because every choice involves a trade-off: you give up something in favor of your first choice. When you choose to use your limited time one way, for example, seeing a movie, you give up other uses of that time, say, studying. The opportunity cost is defined and measured as the "best alternative foregone" when a choice is made. In other words, the opportunity cost is the next best thing, in your own view, that you could have done with your limited resources, your income or time, for example. This notion that resources are limited is an important aspect of the opportunity cost concept since, if resources were unlimited, you would not have to choose at all. The opportunity cost of a choice reflects the real consequences you expect will follow from making a particular decision. This cost is usually the difference between your first and second choices.
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